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September 2016

Solving Problems In High Density Electronic Packaging

This month I was a guest at the High Density Packaging Users Group (HDPUG) meeting in Nashville, TN. The consortium, composed of more than 50 companies (small and large) in the electronics packaging supply chain conducts projects to solve real world problems or develop data for product parameters, package/component life, and production processing. All status presentations were short and to the point. HDP announced the impending completion of 8 of its projects. Different companies around the world recommend and participate in the projects of import to their businesses. The results are available for use to members only. The rapidity and output of this particular consortia surprised me. It clearly appears to provide an affordable solution for problem solving and data development in the day of vanishing R&D (especially D) funds.

Lincoln International Adds an Innovative and Global Joint Venture & Partnering Practice

Lincoln International, the leading global, mid-market investment bank, announced today that it has added a new global capability in joint venture ("JV") and partnering advisory service.  Lincoln International’s JV & Partnering Team’s expertise spans the entire JV and partnership lifecycle, from creating sustainably successful new JVs in emerging economies, to resetting, restructuring and exiting existing JVs and partnerships, globally. A particular area of focus for the team will be driving improved value from the diagnosing and resetting of terms and operations of individual (or portfolios of) underperforming JVs, partnerships and minority stakes.

Update From Productronica India

The bare board market in India is now $1.2 billion of which only $360 million is made domestically. The market size is optimistically forecasted to quintuple to $6 billion by 2020 as there is a strong push by local industry and governments (local and national) to increase the percentage of domestic production. There are currently over 200 PCB fab companies in India of which about 60% are classified as "small-scale" industry. Infrastructure for bare board fabrication is still a problem as key high tech supplies such as copper clad laminates and dry film photoresist must come from abroad.
Most domestic PCB production is made from FR-4 and is low-tech, 4-layer (or slightly higher).

Chinese telecoms giant Huawei Technologies will start to make  smart-phones in India next month joining a wave of compatriots setting up in one of the world's biggest mobile phone markets.
The plant will be operated with the Indian arm of electronics manufacturer Flextronics International in the southern Indian city of Chennai, Huawei said in a statement. As growth in China stagnates, India, the world's fastest-growing smartphone market, is providing Huawei and rivals like Xiaomi with new expansion opportunities.

Lincoln International, the leading global, mid-market investment bank, announced that it has added a new global capability in joint venture ("JV") and partnering advisory service. Lincoln International’s JV & Partnering Team’s expertise spans the entire JV and partnership lifecycle, from creating sustainably successful new JVs in emerging economies, to resetting, restructuring and exiting existing JVs and partnerships, globally. A particular area of focus for the team will be driving improved value from the diagnosing and resetting of terms and operations of individual (or portfolios of) underperforming JVs, partnerships and minority stakes.

Last month's NEPCON South China was busy - with "tire kickers". There was a lot of interest in the products shown, but few buyers as the industry continued in its doldrums outside of a few "hot spots" - automotive, military, and medical. There did not seem to be any grousing about the 2 year wage freeze imposed by the government after years of mandated increases of 18-20%.

August 2016

In the EMS world

2nd quarter M&A announcements included: PARPRO Corporation acquired Cal Quality Electronics; Tekmart Integrated Manufacturing Services acquired Sanyo Manufacturing’s injection molding facility in Tijuana; Cemtrex Inc. acquired Periscope GmbH; Flex sold its Valencia, CA high-mix microelectronics business unit to NEO Tech; and Foxconn Technology acquired TeleEye Holdings Ltd.

Summarizing EMS companies' Q2 results, and comparing them with the  same period a year ago, we find that in the Large Tier (>$3 billion), Jabil Circuit showed the most improvement in operating margin to 3.2% from 2.9%; Key Tronic led the Mid Tier ($300 million to $3 billion) in operating margin improvement, up to 2.1% from 1.7%; in the Small Tier, (<$300 million) SMTC Corporation showed the most improvement in operating margin to 2.2% from 0.3%.  (Source: Lincoln International)

When pruning is necessary to ensure survival, what is the best way to do it? Should every enterprise survive? Nothing is forever!

There is now huge overcapacity in board building enterprises. The world's largest contract assembly/box build companies invested heavily in facilities and labor to satisfy the demands of one or two surging customers. Now there is more competition. Markets are becoming saturated. Margins are being squeezed. Innovation is taking its toll.

Who feels the pain when there is no more room to cut costs and still make a profit? What happens when the market declines or shifts? What will be the cost for change this time?

A recent conversation with colleagues on this topic reminded me of days gone by when Burroughs and Motorola squeezed their PCB makers and supply chain so hard for price reductions – then moved the orders elsewhere – that the board makers folded, and some suppliers vanished.

In July, Apple reported a third-quarter profit of $7.8 billion, compared with $10.7 billion in the same period a year ago. Revenue from the iPhone was down 23%. “Currently, Apple’s profits are declining, and the effects of this decline have been passed on to suppliers,” a New York’s China Labor Watch report says. Digitimes reported this summer that Apple suppliers were feeling more pressure to reduce costs.

News from Taiwan

NanYa PCB reported July sales of $77.46 million, about the same as June's sales, but up by 7.5% from July 2015.  Losses for the 2nd quarter were reduced to $7.32 million from the $10.2 million loss the previous quarter.

Low order levels for the iPhone during the first half of 2016 are negatively affecting the sales of a number of FPCB suppliers including Zhen Ding and Flexium.

Flexible printed circuit board (FPCB) producer Ichia Technologies had consolidated revenues of $17.2 million for July, up 4.48% for the month but down 13.2% from 2015 on the year to date. In July, sales of integrated chassis components totaled $4 million, while sales of FPCB products reached $13.5 million. Accumulated Y-T-D 2016 revenues were $106 million, down 24.45% from the previous year.

Automotive board supplier Chin-Poon Industrial increased its holdings in Draco PCB Public its Thai subsidiary, from 52.5% to 75%

Compeq Manufacturing had sales of $115 million for July.

PCB maker Apex International has reported net profits of $4.078 million for the second quarter of 2016, up 26.7% on quarter and 65% for the year to date. The company's July revenues were $29.1 million for July, up 33.7% over July 2015.

The value of PCB products produced by Taiwan-based producers in China and Taiwan is expected to increase 8.8% $4.54 billion in the 3rd quarter.

Gaining traction

Fan-out wafer level packaging (FO-WLP) continues to expand market penetration in a wide variety of formats developed by TSMC, Deca Technologies, ASE, STATS ChipPAC, and Fraunhofer.

It's still all about the car

Singapore’s nuTonomy became the first company to put autonomous cabs on the street. U.S. tech giants Uber and Google were expected to follow shortly thereafter.  The initial tests involve a dozen vehicles in a 2.5 square mile zone with an observer on board and a restricted destination list. Can you imagine the number of lasers, radar devices, sensors, circuits, transmitters, and new electronic packages that will be required for vehicles in the very near future? Automotive electronics will exceed 9% of the approximately $1.5 trillion global electronic systems market.

Convoluted future for electric car batteries

Nissan Motor is reported to be in talks with Panasonic as well as overseas companies including Chinese firms over the possible sale of its 51% interest in Automotive Energy Supply Corporation, which makes lithium-ion batteries for electric vehicles NEC own the balance of the company. Nissan was said to be interested in selling the company because it would be cheaper to buy batteries for its electric vehicles from other makers.

Competition to supply batteries for electric vehicles is heating up due to expectations that a growing number of lower emission cars will be produced in the coming years. Tesla Motors, which currently procures batteries for its electric vehicles from Panasonic, is planning to boost its total vehicle production to 500,000 in 2018 - two years earlier than its original target.

Nissan and Renault SA, under Carlos Ghosn, who heads both companies, have bet more heavily on electric cars than their mainstream competitors. In 2009 the two companies pledged to invest $4.43 billion to build models including the Nissan Leaf compact and as many as 500,000 batteries per year to power them.

Reuters reported in 2014 that Ghosn was preparing to cut battery production by AESC and instead use packs made by LG Chem.

Another example of the expanding trend of distributors providing full services for the shrinking footprints of equipment and chemical producers.

JUKI Automation Systems, a worldwide supplier of SMT placement systems and production solutions, and full service distributor ETEK Europe Ltd. bundle their competences in order to strengthen their local presence in the markets of the United Kingdom and Ireland - and to further expand their common growth potentials. ETEK provides sales, maintenance, repair, and installation services for its principals. It provides customer training at its  the 14.000 square meter Technology Center in Prestwick, Scotland.

Mycronic AB will acquire 75% of Shenzhen Axxon Automation Co., Ltd. (Axxon) for approximately $51 million in cash from its own funds. Mycronic will obtain the balance of the shares over the next 3 years. Axxon develops, manufactures, and sells dispensing equipment for the electronics industry and is a leading supplier to the SMT market in China. China represents approximately 40% percent of the global dispensing market worth several hundred million dollars.

Materials matter

The Strategic Materials Conference (SMC), themed “Scaling Challenges: The Future of Materials and Packaging” will be held at the Computer History Museum in Mountain View, California on September 20–21. This year’s event will focus on emerging materials and packaging technology trends across the entire microelectronics supply chain. Speakers will include Dr. John Hu, director of Advanced Technology, NvidiaIngrid Y. Shi, secretary general, Integrated Circuit Materials Industry Technology Innovative Alliance, China, and Dr. Anton DeVilliers, senior Technologist, Lithography, Tokyo Electron America.

The Silent Complaint

There have been many books written on marketing and niche marketing, sales, new product introduction, product promotion, customer satisfaction, after sales service, building a business.
But there have been fewer written on the silent complaints: No calls, no RFQs, no orders, or re-orders. Just a deafening silence. A void where vibrant business communications fail to materialize.
Months and years of planning, R&D, and work can go down the tubes due to the inaction or inappropriate action of one employee, often a senior manager of a business unit.
This can often simply be a lack of response to an inquiry. There are a number of appropriate ways to deal with an inquiry. Respond directly by phone or email, refer the matter to another person to handle it – and advise the inquirer of your action, or, even say that you cannot provide the requested information. Whatever you choose to do, DO NOT just ignore it! That is rude and reflects badly upon your company, as well as upon you.
If one wished to be sure that the arrogant message of how unimportant the business prospect may be, repeat the silence when the inquirer follows up on his original unanswered query.

There is another way you can negate the work and accomplishments of your colleagues while lessening chances of success of your company. Make a promise or commitment, e.g., “I am away on a business trip, but will respond next Tuesday.” Then do nothing.
Did you say that I exaggerate? Do you think that this doesn’t happen in the real competitive world? Well, I must tell you that it does. I have personally experienced both of the above examples from the “Head of Operations” of a business unit of an otherwise reputable company.

Maybe this behavior is another unintended consequence of the digital age and the dehumanizing and depersonalization of conducting business.

What do you think?

In any event, my impression of the company in the aforementioned example is now one of unreliability.

Gene H. Weiner, author and publisher of this column, will talk about reshoring challenges and present 6 new items of interest to the electronic packaging supply chain at the September HDPUG (High Density Packaging User Group) meeting in Nashville, Tennessee.

On November 16 Weiner will present an IPC "Wisdom Wednesday" Webinar title:  "A Vision for the Industry". The free webinar will be an IPC Members ONLY presentation.